BLOG: City Group Urges Reform of Controversial Gas Rate Hike Program

Reform — that was the message delivered this week to Texas lawmakers considering the future of the much maligned Gas Reliability Infrastructure Program.

Known also as “GRIP,” the program allows Texas gas utilities to increase rates once a year, but without any meaningful review in advance by regulators. An analysis of the program by the Atmos Cities Steering Committee, one of TCAP’s sister organizations, has found that GRIP is ripe for abuse. Newspaper editorial boards and consumer groups also have criticized GRIP.

“We believe the statute should be changed — if a utility is earning more than their authorized rate of return, it should not be allowed to increase rates further,” said Thomas Brocato, an ACSC attorney, as he enumerated one of several GRIP reforms proposed by the city group. Brocato’s comments came during an April 18 hearing in Austin of the House Energy Resources Committee, chaired by state Rep. Drew Darby, R –San Angelo.

The Gas Reliability Infrastructure Program allows monopoly utilities to increase rates even if the company’s overall expenditures are declining, even if its revenues are increasing or even it the company is earning windfall profits. Under GRIP rules, a gas utility need only claim it has made extra investments associated with one part of its business — capital costs — and then it can obtain a rate increase.

Texas Railroad Commission regulators grant these increases as a ministerial act without consideration of the utility’s overall revenues, without consideration of offsetting savings in other areas of the utility’s business or even without consideration of whether the infrastructure investments are prudent. The GRIP program was authorized by the Texas Legislature in 2003.

Among the changes proposed by Brocato are new requirements that offsetting revenues from load growth be considered in GRIP cases, that the GRIP statute include new limits on the number of occasions utilities can file for interim increases before submitting to a general rate case, and new language to discourage abuse of GRIP rules by utilities.

Thomas Brocato

“But none of (our) proposals would … keep companies from making investments … We support safe and reliable service and we want to encourage infrastructure development,” said Brocato, speaking during the Texas Capitol hearing.

Jason Ryan, a vice president for Houston’s CenterPoint Energy, defended GRIP — even if it results in rate increases for already over-earning utilities. He called the GRIP statute “efficient, transparent and balanced” because it reduced the need for more robust rate reviews, and because utilities disclose new infrastructure expenditures when they file GRIP cases at the Texas Railroad Commission.

Ryan failed to mention, however, that gas utilities also disclose their expenditures in traditional rate cases — the difference being that regulators can disallow imprudent expenditures in traditional cases, but are restricted in their ability to do so in GRIP cases. Neither does any avenue exist within GRIP filings to lower rates, when appropriate, in order to save money for consumers.

State Rep. Charles “Doc” Anderson, an Energy Resources committee member, appeared sympathetic to the ACSC reform message. “We’re trying to be very conscious of what the consumer pays,” said the Waco lawmaker.

TCAP is a coalition of more than 150 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.

R.A. "Jake" Dyer

Is a policy analyst for TCAP, a coalition of cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.

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